Transform or disappear, the Darwinism of IT: In order to adapt to a digital world, a two-speed IT is needed.
Despite the importance of IT in today’s digital world, Chief Information Officers (CIOs) often struggle to get their voices heard by executive committees.
Faced with this challenge, IT departments are being forced to reinvent themselves to adapt their companies to the fast paced evolution of technology. The Boston Consulting Group has developed a business approach that allows IT to shed off its appearance of a heavy cost center and to adopt a new, more realistic persona as a quality service provider, partnering with users and the management.
Would you be a professional, a student in engineering, a student in a business schools or would you just be interested in digital transformation and its implications on IT, Learn with three BCG experts why and how to manage an IT department as a business in order to transform a company and adapt it to a digital world.
Join the conversation: #2SpeedIT

Vanessa Lyon

Eric Baudson

Transcript

[MUSIC] Manage uncertainty. Budget time is a dreadful time for sales, because what do people want from a budget. They want always more, and they want flexibility. And what do they get? Let me tell you a story. A CIO in insurance company was working on his budget, and he has his regular plan about the portfolio project. At one point of time, the CIO said, we need a new e-commerce system. This is very important for us. Our customers are getting online. Let's build a new e-commerce system. So he went and as the CIO, I would like to get it before the end of the year. We were in May. The CIO said, I'm sorry we are in May. The budget has and the project have already started. If you want to build a new application, either we start it in January, or you give me some money and resources to start it now, but it's not in the budget. The CIO was annoyed. He told the guy, you have 800 million euros of budget. So you should be able to arbitrate within your budget, and manage uncertainty. The CIO was not about to do that, because he has not built the budget in the right way. And when you think of it, it's amazing. Because 800 million euros is a lot of money. Of course, not everyone has this type of money. But, as you can see in the picture, when you have a budget like that, you can always play with it. You can decide to over spend in some places, under spend in some others. And that's really, this choice of location is of power of the CIO. As its value you can decide during the year. I will do this project, I will not do this project. I will maybe do this project, but 20% of it and it's gonna be a first cut. You can decide to reduce service in some places, increase service in some other places. And actually this is where you can get useful for because you can then decide to overspend on a business then which. And you can decide also where something is going right that you see the service level is probably a bit too much, you can reduce it. You can go to a project with some difficulty and say, I will help you. I will give you some more sources to make sure that we can go after the delay. And some projects that are very well one-hand, you can take money back from them. But don't do that. You need transparency. You can only manage uncertainty if you get transparency. People not tend not to give you transparency. Because if they give you transparency they lose their own power. So one of the keyword of the CIO is managing the uncertainty. Giving confidence to everyone, that they should get the transparency. Why is it complex? As you can see here, many actors on the within IT and outside IT. You also have very different topics. Technical topics and business topics. And also, sometimes, people don't know what they need. If you go to the business line, they're not very clear about what they will need next year. So you have budget with a lot of uncertainty. But, it's okay. As long as you put in place some control mechanism that allows you to manage the uncertainty. So what are the control mechanism? Or what is a successful budget? A budget goes together with a staff plan. One of the key things to managing certainty is your staff plan, internal and external. You should always manage a budget with dollars and with people. In a new project, how much will it cost, but also what is upper plan and a lower plan? Over all, what is a total staff plan? How many people you have, by which type of categories? This is very important. To give you an illustration, we found out, at the insurance company, that the way the budget was made was following a typical pattern. The first three months of the year, people were thinking about designing your application. So in your staff plan,you would have lots of businessman working, then you would have a lot of IT programmers coding. And in the last three years, three months of the plan or the budget, you would have again a lot of business analysts to do, I mean, the integration and the verification of the coding. So the way the budget was made was not optimal, because you had too many business people involved the first three and last three months of the year. And many programmers involved in the six months of the year in the middle. But it was not smooth. It should be smooth. So staff can give you that. You should put controlling and reporting mechanisms in place. So what are these controlling and reporting mechanisms? So there are one. The people want a staff plan. The supply in one, so portfolio one in terms of application and in terms of new project. And the technology one. If you have this control tower, then you can manage in certainly, because you will see what is happening physically on your budget. And the last one which is very important. Is to be synchronized with the global budget. A global budget usually is reviewed three or four times every year. And your IT budget should also be reviewed three or four times a year. So you should have a quarterly plan. Whereas, the portfolio project can be reviewed and changed every quarter. If you don't have that, you will not be able to manage your flexibility and the uncertainty that is needed. This is the way it should be done.

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